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HMRC internal manual

VAT Valuation Manual

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HM Revenue & Customs
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Special valuation provisions: relationship between Section 19 and Schedule 6 of the VATA 1994

Section 19(1) of the VATA 1994 creates an order of precedence in which valuation provisions are to be applied:

19(1) For the purposes of this Act the value of any supply of goods or services shall, except as otherwise provided by or under this Act, be determined in accordance with this section and Schedule 6, and for those purposes subsections (2) to (4) below have effect subject to that Schedule.

The order in which valuation provisions should be applied is as follows:

  1. If the situation is one to which the relevant valuation provision is contained in a part of the Act other than section 19 or Schedule 6, eg a gaming machine under section 23, then that other section is applied.
  2. If the situation is one covered under Schedule 6, then Schedule 6 is applied. This is because section 19, subsections (2), (3) and (4) have specifically been made subject to Schedule 6 by section 19(1).
  3. If neither of the above applies, then sections 19(2), 19(3) or 19(4) are applied.

The final subsection of section 19 is sub-section (5) which contains the definition of open market value.

19(5) For the purposes of this Act the open market value of a supply of goods or services shall be taken to be the amount that would fall to be taken as its value under subsection (2) above if the supply were for such consideration in money as would be payable by a person standing in no such relationship with any person as would affect that consideration.

Open market value is no longer employed as a basis for valuing a non-monetary consideration (see paragraph 1.9). It is used principally in Notices of Direction issued under the first two sections of Schedule 6. These are when supplies are made to connected persons (Paragraph 1 of Schedule 6) or via a direct selling arrangement (Paragraph 2 of Schedule 6).